EASING INTO AN e-SOLUTION - d b

EASING INTO AN e-SOLUTION:DEUTSCHE BANK’S RITA SAVERINO DISCUSSES HOWOFFERING FULLY-INTEGRATED E-SOLUTIONS TOCLIENTS IS A CASE OF BOTH LISTENING AND LEADING.

TRADING TREASURY TECHNOLOGY

OC

TOB

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2009

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As supply chains expand around the worldand consumer markets become increasinglyinternational, foreign exchange transactionsare becoming evermore commonplace. As such, therefore, there may not be animmediate priority in the search for efficiencygains, cost reduction or better riskmanagement. But perhaps there should be.

“When people think of e-commerce,they tend to think about being able toexecute on a price electronically,” says Rita.“But that’s not really what it’s about;electronic solutions are not just about accessto price. When we look at the underlying FX

activities of Corporate transaction, we seethey are part of an interrelated workflow. The workflow value chain includes pre-tradeand post-trade functions. Pre-trade functionssuch as cash forecasting, exposuremanagement, maximising use of internal

liquidity for inter-company funding and post-trade functions such as reporting,settlement to standard accounts or third-party payments, confirmations, STP andrisk management tools. Then in the middle,there’s the trade execution part, where

> easing into an e-solution

RITA SAVERINOHead of Corporate e-solutions,Deutsche Bank Foreign Exchange

Corporate treasurers are operating more and more in a globalised marketplace and

have foreign currency exposure whether explicit or not. More than ever, today’s

challenging economic conditions have witnessed the rise of e-solutions as key in

achieving the required efficient, error-free and information-rich FX solutions.

Rita Saverino, head of Corporate e-solutions for Deutsche Bank Foreign Exchange, tells

Drew Hillier how Deutsche Bank is both listening and leading.

COVER INTERVIEW I DEUTSCHE BANK

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decisions have to be made as to whetherthey trade electronically or via voice, with a single bank platform, or a multi-bank platform.”

Drilling down in to these often complexrequirements, Rita emphasises how she andher team are committed in their task ofgetting to know their corporate customersand figure out what is it that they need in apre- and post-trade workflow, which, as shesays: “Our aim is to tailor our solutions to theTreasurer’s need. We have been successfulwith our autobahn®Treasury features with ourGerman client base and plan to roll outthese features globally next year.autobahn®Treasury offers features such as:intra-company trading that allows corporateswith centralised treasuries to efficientlymanage their subsidiaries exposures, fullreporting functionality, as well as crosscurrency netting.”

Rita went on to describe how manycompanies, especially those in the mid-capspace, still undertake a lot of this work onspreadsheets. “It’s very manual, with roomfor error and no clear transparency,” she

says. “Clients can then hedge the FXexposure or divert idle cash into high-yield investments via our autobahn®

suite of products.”Rita explains how autobahn®FX is

Deutsche Bank's electronic platform fortrading foreign exchange and preciousmetals. Designed by traders and leveragingoff Deutsche Bank's technical expertise, Ritaoutlines how it provides “easy-to-use tradingfunctionality, with dynamically-priced,executable streaming prices and double-clickexecution. In addition,” adds Rita, “clientscan access an algorithmic tool that givesthem the ability to control how they want toexecute in the market – whether it’s in theslicing, timing, or price point of their orders.”

Focusing in the third party FX paymentand receivable space, FX4Cash was launchedin 2008 to provide global cross-currencysolutions for corporations and financialinstitutions. This is achieved by pairingDeutsche Bank's industry-leading foreignexchange business with its top-rankedpayment and clearing capabilities, which, Rita comments: "Since its launch last

year, clients have valued FX4Cash for itsability to help them minimise costs andsimplify operations for their international obligations.”

Certainly, FX4Cash has successfullyenabled corporations and financialinstitutions to obtain real-time andcompetitive FX pricing across more than2,000 payable currency pairs.

“The key thing,” says Rita “is that the FXtrade is linked to the accounting entry intheir ERP systems, so all the information thatcomes from the client’s accounting andbilling systems gets consolidated in one file.”

I wondered if the level of sophisticationnow being sought by corporate clients hascome about as a direct result of the creditsqueeze and resulting liquidity challenges?Or is it simply a naturally evolving process,driven at boardroom level, given theincreasing bottom line considerations aroundan inefficient cash treasury function?

“It’s both,” Rita replies. “The last tenyears has seen the whole FX industry migratenot only towards greater transparency, butalso better access to rates and enhanced


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reporting. If you look across the board atover-the-counter products, FX is wellpositioned with plenty of access to liquiditysources and improved transparency.”

Nor, asserts Rita, is FX as convoluted assome of the other credit derivatives. “I thinkthe FX market in general has been movingthat way,” she maintains, “spearheadedmainly by the hedge funds and algorithmictrading models. What really impactedcorporates since last year, from a marketperspective – not so much the largecorporates with treasuries – but small- andmid-caps, is that they realised they had alevel of FX exposure where perhaps theynever realised they did before. This hascontributed a great deal to highlight theimportance of counterparty risk. After all,bank credit was never expected to be the issue… it was always supposed to be the other way around!”

Counterparty risk and liquiditymanagement constitute a crucial area ofinterest for corporates, as too, of course,does cash flow. With the normal progressionof markets becoming efficient, how doesDeutsche Bank’s suite of tools help in cash forecasting?

“Well, in the case of Deutsche Bank, aleader in FX and Cash Managementsolutions,” answers Rita, “it’s about offeringfully-integrated solutions leveraging the corecompetencies of the two groups. FX4Cashpresents a very good case of two businessareas working together to create solutionsfor clients. The direction in which I see usgoing is to continue working with clients whohave chosen us as their cash managementbank being able to make decisions on theirbalances – whether it’s FX hedging or,investments. Obviously they can already do

this today; however, our goal is to streamlinethe workflow so there’s no room for error.”

Inasmuch as the building blocks are inplace, the ongoing engagement with clientsand thinking about their needs remainparamount. After all, banks are very silo-driven and fragmented: they’re credit,and FX, and trade finance, custody, and cashmanagement… many different areas withdifferent systems… which need a coherent,holistic approach. In agreeing with thisanalysis, Rita Saverino is keen to stress how,in the case of the Deutsche Bank strategy,“…where our Corporate customers touch usacross many different touch points in theorganisation, it is really important that weintegrate our platforms. When we look at theTreasurer’s work day, we can help themunderstand their exposures, covering the riskand sending it back to their subsidiaries. Wecan definitely provide tools for them toaccess the market.”

So, looking at the wider scenario going forward, how does Rita see thingspanning out?

“In general, I think there will be lessvolatility around. And while to some degreethere will still be some credit concerns, theywill be easing off. However,” continues Rita,“what I do think everyone’s going to befocusing on are the concerns around theregulatory environment going forward. It’llbe very interesting especially to see whathappens in regard to over-the-counter FX.For example, will the regulators insist thatthe FX cash products get cleared on anexchange?” She adds, concluding: “In myview, it’s unlikely the regulators will comedown on the execution of FX on anexchange but will focus more on the clearingFX products.” >


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